Should Bank of America Shareholders Worry About This?

Bank of America (NYSE:BAC) is stirring up shareholders with its new plan to strengthen its balance sheet. The bank is looking to issue 400 million shares and $3 billion in senior notes, which will result in dilution of existing shares.

Bank of America (NYSE:BAC) shares fell over 4% this morning—the largest drop in the KBW Bank index and Dow Jones Industrial Average (NYSEARCA:DIA). CEO Brian T. Moynihan says that the bank is avoiding solutions that dilute shareholders’ stakes, something the bank already did in 2009, but investors are clearly worried.

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Richard Bove, an analyst with Rochdale Securities LLC. said in an interview with Bloomberg, “the major issue is they said they wouldn’t issue stock, and this may be one too many statements to investors that didn’t turn out true.”

Meanwhile Jerry Dubrowski, a spokesman for Bank of America (NYSE:BAC), stated “It’s changing the composition of our capital from one that is restrictive to one that is much more flexible and lower cost. In doing so, we strengthen our balance sheet and provide long-term value to our shareholders, including common shareholders.”

  • Bank of America Corporation (NYSE:BAC): The shares recently traded at $6.62, down $0.29, or 4.2%. Its market capitalization is $67.09 billion. They have traded in a 52-week range of $5.13 to $15.31. Volume today was 104,430,298 shares versus a 3-month average volume of 313,170,000 shares. The company’s trailing earnings are $-0.31 per share. The company pays a dividend of $0.04 per share for a dividend yield of 0.60%. About the company: Bank of America Corporation accepts deposits and offers banking, investing, asset management, and other financial and risk-management products and services. The Company has a mortgage lending subsidiary, and an investment banking and securities brokerage subsidiary. Get the most recent company news and stock data here >>